Air cargo traffic is growing. How is it affecting the demand for narrowbody freighters?
Angus Mackay — 10 MIN. READ
Only one event this year gives you the best aviation briefing about issues in the Americas and internationally – the CAPA Americas Aviation Summit. The event, organized by CAPA -Centre for Aviation, is a high-level forum for debate and discussion of strategic issues facing the region’s aviation industry and will attract airline and travel industry CEOs from across the Americas region, Asia, Europe and the Middle East.
This year's agenda highlights include:
ICF Principal Carlos Ozores will be part of the High Growth Markets: Serving Latin American Markets Panel. Latin America has long been the backyard for U.S. airlines of all sizes. As a high potential growth market, its outlook is quite different from the Asian profile. Already U.S. airlines have secured significant equity holdings and partnerships, in attempting to subdue some of the more difficult elements of competition.
This has been possible as several key Latin American countries, such as Mexico, Brazil, Chile, and now Argentina have adopted relatively liberal aviation policies. Ownership, control and foreign equity ownership have been significantly relaxed in several cases. Only a small number of states including those of Central America have resisted this trend. As the main Latin economies emerge from the difficult times they have experienced in this decade, there is the potential for U.S. airlines to establish even stronger ties. Questions to be addressed include:
Carlos Ozores will also moderate All’s Fare in Love and War: Is Aggressive Pricing a New Competitive Reality? Bankruptcy and subsequent consolidation have delivered the major airlines a low cost base and strong market positions, especially at their main hubs. But a combination of lower fuel prices and a resurgence of low price competition has created downward pressures on yields over the past year. These may be recoverable, but there is a constant threat of ULCC entry on city pairs that have been lost as major airlines consolidated – a network phenomenon that occurred in Europe and Asia as LCCs have successfully gained dominant positions.
Compared with other developed regions there is relatively lower connectedness for medium sized airports since consolidation. As those airports (and their local economic interests) become more aggressive in their marketing activities, and as ULCCs expand, a new network and pricing dynamic will appear.
Unlike their Asian and European full service peers - who are much more exposed to LCC pressures - US airlines have not resorted to establishing low cost subsidiaries.
Instead they have used various pricing strategies on their mainline operations. To date this appears to have been successful. As low cost competition grows and the majors’ cost bases rise, this may call for new responses.